Macroeconomic performance and outlook
Real GDP contracted in 2019 by an estimated 2.4% driven by a contraction in the services sector and investment in real estate and business services. Agriculture, accounting for 32% of GDP, also contracted in 2019, due to shortages of inputs—especially fuel. And a weak business environment, where political uncertainty discouraged private investment, dampened confidence and productivity in manufacturing and construction. GDP is projected to contract further by 1.6% in 2020 and 0.8% in 2021 due to the political situation, tepid domestic demand, and weak private sector investment.
Inflation reached 50.6% in 2019, fueled by high pro- duction input costs due to currency depreciation. Inflation, projected at 61.5% for 2020 and 65.7% for 2021, is mainly driven by the monetization of the fiscal deficit, which narrowed from 7.7% of GDP in 2018 to 5.7% in 2019 but is projected at 9.9% in 2020 and 10.9% in 2021.
The exchange rate averaged 47.1 Sudanese pounds per dollar in September 2019, compared with 45.1 in 2018. The current account deficit improved to 7.8% of GDP in 2019 from 13.6% in 2018. As the world’s largest producer of gum arabic, Sudan will continue to depend on agriculture (32% of GDP in 2019) to boost its exports, generate foreign exchange, and reduce the current account deficit.
Sudan is in debt distress, reducing its capacity to mobilize domestic resources or to borrow from international markets. By September 2019, outstanding public and publicly guaranteed external debt was estimated at about $60 billion, up from $53.6 billion in 2016 and $56 billion in 2018.
Extreme poverty fell from 29.6% of the population in 2010 to 25.2% in 2015, as inequality declined more in rural areas than in urban ones.
Tailwinds and headwinds
With its new government coalition, Sudan presents underexploited opportunities that can reinvigorate economic growth. About 63% of Sudan’s land is agricultural, and only 15–20% of it is under cultivation, offering huge private investment opportunities. Large-scale irrigated agriculture has the potential to create employment and increase national income and foreign exchange earnings. Nonfood agroindustry can accel- erate growth by developing value chains that diversify the economy to compensate for loss of oil revenues. The government should undertake structural reforms to facilitate the movement of labor from subsistence agriculture to industry and services to accelerate labor-absorbing growth and reduce unemployment.
Institutional weaknesses, unemployment that has remained at 14–15% for more than two decades (with 25% youth unemployment), external debt, climate change, and low labor and capital productivity are among the key domestic challenges. Political instabil- ity has also affected growth, with hardening economic conditions, such as the rising cost of bread and fuel and the shortages of cash.
Headwinds also include low productivity growth in manufacturing and agriculture due to inadequate infra- structure, power shortages, and an unfavorable macroeconomic environment. The private sector is constrained by limited access to finance, a low-skilled labor force, and an inadequate legal and regulatory frame- work. The October 2017 lifting of US trade and eco- nomic sanctions was seen as advancing the dialogue on political sanctions and debt relief.
Guide to Buying Bonds
Capital gains are taxed as ordinary income.
Settlement cycle is T+8 days, except for Government Musharaka Certificates (T+1).
Openness to international investors
The government encourages foreign investment. There are no legal distinctions made between foreign and domestic companies. Officially, foreign and domestic investments are treated equally under the law. Foreign investment is restricted in certain sectors of the economy and requires government approval.
Bureaucracy is cumbersome and prone to corruption. Political instability and inadequate infrastructure also discourage investment. All residents may hold foreign exchange accounts. Non-residents may hold foreign exchange accounts with government approval. Some restrictions and controls apply to all transactions involving capital market securities, money market instruments, credit operations, and outward direct investment.
The purchase of government securities is open to foreign investors.
In May 2003, the Central Bank adopted a managed floating foreign exchange regime. In 2007, the currency was redenominated by a factor of one new Sudanese pound equal to 100 old Sudanese dinars.
Foreign Exchange restrictions and profit repatriation
Profits can be remitted but proper documentation is required before funds can be transferred out of the country.